Both condominiums and cooperatives are, for the most part, apartment complexes where residents have an ownership interest. Both generally share the cost of maintenance, both have amenities in common, for example tennis courts, swimming pools, or on-site gyms, and both have sets of rules that residents must follow. But there is a big difference in form of ownership between condominium and cooperative, and that difference can have a real impact on your life within the complex and your ability to sell, should you decide to move.
The resident who purchases a condo actually owns the physical space that they inhabit within the complex and has the right to sell that space at any time. Condominium fees are generally paid separately and cover maintenance and other expenses associated with running the complex. A cooperative, on the other hand, is wholly owned by the residents as a group. If you decide to move, you are not selling the space you live in, but rather your ownership interest in the entire complex. The other members of a co-op typically have veto power over any buyers they find for their share, so selling may not be as easy as selling a condo.
Property taxes are also a consideration. Condominium owners generally pay property taxes on their own condominium, while cooperative owners are responsible as a group for taxes on the entire complex. If for some reason a cooperative building is not fully occupied, or if one or more residents refuse, the entire group could be hit with a large tax bill.
If you’re looking to buy an apartment complex, it’s important to know the distinction between condominiums and co-ops. Be sure to ask; And if you find out that the building you are interested in is a co-op, be prepared with a few questions, for example, is the building nearly full, is there a high turnover of residents, etc. Be sure to find out who runs the co-op, and do some research to verify the management (your local Better Business Bureau and your state’s Real Estate Commission are good places to start). Obtain and read the financial statements of the cooperative and its management, or hire someone experienced in real estate finance to advise you.
Verifying the management and financial viability of a condominium complex is also important, and requires some research as well. But with co-op, the stakes are much higher. If you really love the place you find and it happens to be a co-op, be prepared to do some serious research before you buy.